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Article Artículo

Argentina

Latin America and the Caribbean

World

Cry for Argentina?

The election of the conservative candidate to the presidency in Argentina has been cause for celebration in mainstream Washington, as typified by this Washington Post editorial. I won't claim to know which candidate offered the better path for the country going forward, but we should not let the Washington Post types rewrite the past. 

The governments led by the Kirchners have much to show for their twelve years in power. Nestor Kirchner took power in May of 2003, just as Argentina was beginning its recovery from its dramatic default and devaluation at the end of 2001. The I.M.F. was insisting that Argentina return to the austerity path that had led to a horrible recession in the years from 1998 to 2001. Its per capita income had already declined by more than 15 percent at the point of the default making the downturn more than four times as severe as the 2007–2009 recession in the United States. Kirchner said no deal.

Instead he pursued policies to promote growth and employment, with an emphasis on helping those at the bottom end of the income distribution. To the great consternation of the folks at the I.M.F. (where Argentina became known as the "A-word"), his policies largely succeeded. While the I.M.F. kept predicting economic collapse, Argentina's economy grew rapidly. By the middle of 2003 it had already made up all the ground lost following the default and by the end of 2004 its per capita income was above the pre-recession level. And, it was much more evenly distributed.

Dean Baker / November 27, 2015

Article Artículo

WSJ Goes Long on the Hard to Get Good Help Story

The usually astute Greg Ip gets derailed in a high production values piece that tries to tell us that our problems stem from not having enough kids. For those left scratching their heads while sitting in traffic jams or standing in over-crowded subway cars, the basic story is that we somehow don't have enough workers to do all the work. (Where are those damn robots when we need them?)

Anyhow, the piece starts out quickly on the wrong foot:

"Ever since the global financial crisis, economists have groped for reasons to explain why growth in the U.S. and abroad has repeatedly disappointed, citing everything from fiscal austerity to the euro meltdown. They are now coming to realize that one of the stiffest headwinds is also one of the hardest to overcome: demographics."

Umm no, those of us who warned of the housing bubble and predicted that the resulting downturn would be hard to reverse saw the weak growth as a 100 percent predictable problem from a shortfall in aggregate demand. There was no source of demand to replace the construction and consumption demand driven by the bubble.

And, I don't recall being at all troubled by slower aggregate growth, the issue was that we were seeing insufficient growth to fully employ the population. The United States and many other wealthy countries have seen a sharp decline in the employment to population ratio. This is true even when we look at the employment to population ratio for prime age (ages 25–54) workers. This is down by three full percentage points from its pre-recession peak and by more than four percentage points from its 2000 peak. It is pretty hard to explain the drop in the percentage of people working by demographics. 

We later get the strange statement:

"Simply put, companies are running out of workers, customers or both. In either case, economic growth suffers."

Dean Baker / November 23, 2015

Article Artículo

Thoughts on NPR's Discussion of the Weimar 70s: Deflating Inflation Myths

NPR had a piece on the horrible inflation of the 1970s and how the country was rescued by the herioics of Paul Volcker who was Fed chair at the time. The piece raises several points that could use a bit more context and leaves out some important information.

First and most importantly, the piece implies a world that did not exist. It begins with a discussion of a speech by President Gerald Ford in 1974. It told listeners:

"Inflation was the silent thief, and every year it got worse. Inflation got worse. It went from 10 percent to 11 percent to 12 percent. It wasn't clear exactly why and no one could agree on a simple way to fix it."

Neither part of this story is especially true. Inflation was hardly silent. It was widely reported, so people did know about it. Nor was it obviously a thief. Many, perhaps most, wage contracts were indexed to inflation, which meant that wages rose more or less in step with prices. While this was not true for everyone, a substantial segment of the population was able to insulate itself from the effects of inflation. This is one of the factors that made it harder to contain inflation.

It is also not true that no one knew how to fix it. Higher unemployment reduced workers' bargaining power and lowered demand in the economy. This slowed inflation. In fact, the skipping from Gerald Ford to Paul Volcker, mispresents the actual course of inflation over this period. Inflation did in fact come down. After peaking at 10.4 percent in 1974, it fell back to 5.5 percent in 1976 before it started to rise again. The main factor bringing inflation down was a steep recession in 1974–1975, so the method for bringing inflation under control was not quite as difficult to figure out as the piece implies.

Dean Baker / November 22, 2015

Article Artículo

Haiti

Latin America and the Caribbean

World

New Survey Casts Doubt on Haiti Election Results

A new survey from the Brazilian Igarape Institute, released today, indicates that official results from Haiti’s October 25 presidential election may not reflect the will of the voters. In the wake of the election, local observers and political leaders have denounced what they claim was massive fraud in favor of the governing party’s candidate, Jovenel Moïse, who came in first place with 32.8 percent of the vote according to the preliminary results. In second place was Jude Célestin with 25.3 percent and in third and fourth respectively were Moïse Jean Charles with 14.3 percent and Dr. Maryse Narcisse with 7 percent. Final results are expected this week.

But the survey, which is based on interviews with over 1,800 voters from 135 voting centers throughout all of Haiti’s ten departments, reveals a vastly different voting pattern than the official results. 37.5 percent of respondents indicated they had voted for Célestin while 30.6 percent voted for Jean Charles and 19.4 percent for Narcisse. The governing party’s Jovenel Moïse was the choice of just 6.3 percent of survey respondents. (See an AP story about the survey here.)

The official results have set up a potential runoff between Jovenel Moïse and Célestin on December 27, but Célestin has so far refused to recognize the results or accept his second-place position ahead of the second round of the elections. A coalition of eight candidates has labeled the results “unacceptable” and called on the Provisional Electoral Council (CEP) to form an independent commission to audit the results and investigate allegations of fraud. After a meeting on Monday between the CEP and the G8, as the opposition coalition is known, the CEP formally rejected the proposition, claiming that the electoral decree did not allow it. Opposition groups responded by pledging to continue a growing protest movement that has seen many thousands take the streets since results were announced, threatening to derail the costly and internationally backed electoral process.

A large protest was broken up by police on Wednesday near the CEP headquarters. Police used tear gas and rubber bullets and Steven Benoit, one of the opposition presidential candidates challenging the results, suffered injuries to his head. Moïse Jean Charles, who was riding on horseback, was also reportedly injured, and yet another presidential candidate, Jean Henry Céant, was reportedly detained and threatened with arrest.  

Jake Johnston / November 19, 2015

Article Artículo

Government

United States

That Not-So-Progressive Tax Code

In recent weeks there has been significant discussion about the effects of raising taxes on the rich. Think tanks, government institutions, and media outlets such as the Brookings Institution, the U.S. Treasury Department, the New York Times, the Washington Post, and Vox have all devoted significant coverage to the prospect of raising taxes on wealthy Americans.

The coverage has focused for the most part on the federal income tax. The federal income tax is a progressive tax that requires rich Americans to pay higher rates than the poor.

But the federal income tax is just one part of the larger overall tax code. Other parts of the tax code which are regressive generate as much or even more revenue than the federal income tax.

CEPR and Nicolas Buffie / November 19, 2015